Climate Investment Newsletter 4/17 - 4/23

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Head of Climate Funds Research and Evaluation

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Individual Deals and Market Watch

SOSV’s burgeoning climate portfolio is worth nearly $6 billion as planetary health bets pay off [Tech Crunch]

• The burgeoning climate-focused portfolio from early-stage investor SOSV Investments has managed to raise nearly $2 billion in follow-on financing since the startup companies graduated from the investment firm’s various accelerator programs. Taken together those companies have a collective market capitalization of nearly $6 billion. Click here for SOSV’s Climate Tech 100...
• Why this is important: With 84% of SOSV’s Climate Tech 100 consisting of agriculture, manufacturing, and building systems companies, SOSV is an example of how allocating to climate solutions cross-sectorally is starting to pay off. The four-year average average age of these companies may highlight the scale of the opportunity to come.

Lithium miners in $3.1bn merger as electric vehicles fuel demand [Financial Times]

• Australian mining groups Orocobre and Galaxy Resources plan to merge in a A$4bn (US$3.1bn) deal that would create one of the world’s largest lithium producers as rising demand for electric vehicles turbocharges prices for the metal.

Scott Morrison signs $1bn deal to shore up energy reliability in South Australia [The Guardian]

• It will pursue initiatives that create additional dispatchable generation to help deliver affordable and reliable power, unlock gas supplies and kickstart works on a new interconnection between South Australia and New South Wales.

Morrison government flags $A540m for hydrogen and carbon capture ahead of Biden summit [The Guardian]

• The Australian government says its May budget will include an additional $A539.2m for hydrogen and CCS, building on investments promised during last year’s budget of $A70m over five years for hydrogen and $A50m for CCS. The spending on CCS will increase to $A263.7M.

Polestar raises $500M from outside investors as EV market grows [Tech Crunch]

• Polestar, Volvo Car Group’s standalone electric performance brand, has raised $550 million in its first external round led by Chongqing Chengxing Equity Investment Fund Partnership, Zibo Financial Holding and Zibo Hightech Industrial Investment.  

Meat giant JBS acquires Dutch alternative protein brand Vivera (US$410 mln) for plant-based pivot [Green Queen]

• JBS has announced that it has acquired Dutch plant-based meat maker Vivera in a €341 million (US$410 million) deal. The move by the world’s biggest meat processing corporation is part of its strategy to “boost” its plant-based platform in response to shifting mainstream consumer demand.  According to Vegconomist, Vivera had 2020 sales of €85M.

CleanCapital secures $300 million commitment from Manulife Investment Management, acquires 63 megawatts of operating solar projects [Cision]

• CleanCapital's cumulative acquisitions now total more than $775 million. The company currently manages 200 MW comprising 152 projects in 18 states.

Venture Capital firm raises $175M for climate investment fund [Bloomberg Green]

• The new Congruent Ventures fund has already made seven initial investments, including in Parallel Systems, which focuses on electrified autonomous rail cars.

Japan to develop green bond standards and transition guidelines [Responsible Investor]

• Japan's Financial Services Agency (FSA) and the Tokyo Stock Exchange are creating a framework to certify green and transition bonds ahead of the launch of a dedicated segment on the exchange.
• It is not yet known whether the upcoming standards will be aligned with international expectations for green and transition bonds, such as the Green Bond Principles...

Macro Commitments

New sector-wide net-zero financial alliance promises coordination [IPE]

• The new forum, dubbed the Glasgow Financial Alliance for Net Zero (GFANZ), unites the UN-convened Net-Zero Asset Owner Alliance and the newer Net-Zero Asset Managers initiative.
• Additionally, the 43 banks from 23 countries (with assets of $28.5 trillion) that form the Net-Zero Banking Alliance (NZBA) joined GFANZ - with its members committing to align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner. [UNFCC]
• Mark Carney said the launch of the new alliance was “the breakthrough in mainstreaming climate finance the word needs”.

UNEP-FI announces launch Net-Zero Banking Alliance with 43 major banks [Climate Action]

• The NZBA joins three existing initiatives: the UN-convened Net-Zero Asset Owner Alliance, the Net Zero Asset Managers Initiative and the Paris Aligned Investor Initiative.

$17.6B pledged in Canada’s 2021 Budget for transition to low-carbon economy [iPolitics]

• As part of Canada’s 2021 budget, Finance Minister Chrystia Freeland promised $17.6 billion to fight climate change and to fuel a green recovery. The federal government also pledged to conserve 25 percent of lands and oceans by 2025, and to exceed climate change targets by cutting emissions to 36 per cent below 2005 levels by 2030.

U.S. Treasury creates climate hub to coordinate policy [WSJ]

• The Treasury Department appointed a senior official on Monday (April 19th) to a new post coordinating wide-ranging efforts to fight climate change through economic and tax policies.
• John E. Morton, a former climate adviser to the Obama administration, and then a partner at Pollination Group, will lead the newly formed climate hub that will report directly to the Treasury Secretary Janet Yellen.

AIIB prepares to raise $10bn in sustainable development bonds to finance infra in Asia [Responsible Investor]

• Last year, AIIB raised $9bn through four benchmark issuances, which included its inaugural Sterling and Renminbi-denominated bonds. The transactions were subject to the Bank’s Environmental and Social Framework (ESF), which set out use of proceed requirements and a list of excluded activities.

Ikea to invest ~$4.1bn in renewable energy by 2030 [The Guardian]

• Ingka Group, the owner of most Ikea stores, spent €2.5bn over the last decade installing 935,000 solar panels on the roofs of its stores and warehouses, and investing in 547 wind turbines and 10 solar parks to more than cover its own electricity use.

Amazon and Unilever among businesses teaming with governments on $1bn deforestation pledge [edie]

• Called LEAF - Lowering Emissions by Accelerating Forest finance (LEAF) the Coalition has been set up by UK, Norway and the US with support from Amazon, Airbnb, Bayer, Boston Consulting Group, GSK, McKinsey, Nestlé, Salesforce, and Unilever.  Forest carbon focused Emergent will oversee transactions and oversee administration.

Tikehau Capital plans to launch a private equity decarbonization fund ($300 million) focused on North America [Business Wire]

• Tikehau Capital, a global alternative asset management group with $31bn AUM, announced its intention to launch a North American Private Equity strategy dedicated to transitioning to a low-carbon economy, with $300 million of capital already committed.   Publicly traded in the Paris bourse, Tikehau had previously garnered $1bn for a europe-focused climate transition fund.  

DOE drives $162 million to decarbonize vehicles [Smart Energy Decisions]

• The U.S. Department of Energy announced the third stage of its SuperTruck initiative, including funding of more than $162 million to improve efficiency and reduce carbon emissions among cars, trucks, and off-road vehicles.

UVIC: The climate finance project ($180,000) [Business Examiner]

• Climate Finance: Integrating Climate Change Mitigation and Adaptation Considerations into Investment Decisions is a three-year, $180,000 research project led by the UVic Peter B. Gustavson School of Business in partnership with British Columbia Investment Management Corporation (BCI) and PICS. The project is funded by PICS.
• The project partners will co-develop decision-making tools and frameworks for integrating climate change risk evaluation and climate mitigation opportunities into investment portfolios.

U.S. to double public climate finance to developing countries by 2024 [Reuters]

• The White House said it was embracing "ambitious but attainable goals" for international aid to developing countries, given the urgency of the climate crisis and to compensate for a sharp drop in U.S. funding during the Trump administration.
• This implies that doubling by 2024 would amount to roughly $5.7 billion per year, concluded Joe Thwaites, an associate with the World Resources Institute. - [Source Devex]

Pathways, Frameworks, Case Studies, Research

Climate change could cut world economy by $23 trillion in 2050, insurance giant warns [NYT]

• The effects of climate change can be expected to shave 11 percent to 14 percent off global economic output by 2050 compared with growth levels without climate change, according to a report from Swiss Re, one of the world’s largest providers of insurance to other insurance companies. That amounts to as much as $23 trillion in reduced annual global economic output worldwide as a result of climate change.
• Note from C4C: Conversely, the New Climate Economy report from 2018 “...found that bold action [i.e. investing in reducing emissions and improving resilience] could yield a direct economic gain of US$26 trillion through to 2030 compared with business-as-usual.”

Competitiveness of US funds at risk if SEC doesn’t keep up with Europe on climate disclosure, warns €115bn investment house [Responsible Investor]

• European investment group Cardano has warned the US Securities and Exchange Commission (SEC) that it will find it “increasingly hard” to invest in US funds if ESG disclosure rules fall behind UK and European standards.

Open source climate data project adds KPMG, BNP Paribas and LSEG to list of high-profile backers [Responsible Investor]

• KPMG, BNP Paribas, the London Stock Exchange Group (LSEG), the UN-convened Net-Zero Asset Owner Alliance and analytics provider Ortec Finance have become founding members of upcoming open source data platform OS-Climate.
• The platform, still under development, will host climate datasets and analytics identified as the most material for financial institutions, and will be available for use by the wider market at no additional cost.

IMF launches interactive climate dashboard [Mail & Guardian]

• The dashboard that aims to address the growing need for climate change data in macroeconomic and financial policy analysis. Although the indicators are considered experimental, the data identifies several main categories: economic activity; cross-border; financial, physical and transition risks; and government.

Nearly 50,000 EU firms to provide sustainability data under new reporting rules [Responsible Investor]

• Under the Non-Financial Reporting Directive (NFRD), all listed companies, except for those with less than 10 employees or turnover of less than €700k (so-called ‘micro-undertakings’) will have to report. The rules will also apply to EU subsidiaries of non-EU companies. The parent companies of large subsidiaries will also have to prepare group sustainability data.

UK announces new ambitious climate change target [Climate Action]

• In line with the recommendation from the independent Climate Change Committee, this sixth Carbon Budget limits the volume of greenhouse gases emitted over a 5-year period from 2033 to 2037, taking the UK more than three-quarters of the way to reaching net zero by 2050.

Yale creates new principles for divestment from fossil fuels [Yale News]

• By June, Yale’s Advisory Committee on Investor Responsibility will recommend specific companies for Yale to divest from or not to invest in. The committee will publish the company names online.

Exxon floats $100 bln carbon storage project requiring public, private financing [Reuters]

• The plan would require "$100 billion or more" from companies and government agencies to store 50 million metric tons of CO2 by 2030, with capacity potentially doubling by 2040, Joe Blommaert, president of Exxon's Low Carbon Solutions business, said in an interview.

Loan markets are pricing in climate transition, penalizing coal [Bloomberg Green]

• New research from Oxford University that analyzes changes in loan spreads -- a measure of credit risk -- found the cost of financing renewable energy projects shrunk dramatically over the past two decades, while the opposite was true for coal, the most carbon-intensive of the fossil fuels.

Gas is the new coal with risk of $100 billion in stranded assets [Bloomberg Green]

• Europe wants to reach net-zero emissions by 2050, which is at odds with plans to build numerous infrastructure projects, like pipelines and terminals. If these are built but no longer needed, there’s a potential 87 billion-euro ($104 billion) stranded-asset risk, according to calculations by Global Energy Monitor.